Macro Pulse

The Year in Review

A growing belief that central banks have not only concluded their tightening cycles but could even initiate easing cycles within the next six months has continued to fuel a rally in and bond and equity markets over the past few days. In our charts this week, however, we steer away from the daily macro and market news cycle and highlight six charts instead that give some colour on some of the key macroeconomic trends that have unfolded in 2023. These trends include:
·         The outperformance of the US economy
·         Disinflation in advanced economies
·         The importance of energy prices
·         Still-tight labour markets
·         Growing stress in China’s property market
·         Global temperature anomalies

Stepping back

There has been little to dislodge the growing conviction in financial markets about soft landing scenarios over the past few days as data calendars have been thin and policymakers have been relatively quiet. Investors have, therefore, taken their cue from the dataflow that’s been released over the past month suggesting that inflationary pressures are cooling and that further interest rate hikes could now be unnecessary. In our charts this week we home in on:
·         Markets and data surprises
·         US companies’ pricing power
·         Economic uncertainty
·         Global technological adoption
·         Africa’s demographic promise
·         Regional CO2 emissions

Inflation relief

Growing conviction that central banks have concluded their tightening cycles has fuelled a rally in stock and bond markets over the past two weeks. And that conviction has been reinforced by some weaker-than-expected inflation data over the past few days. In our charts this week we weigh in on this and on other factors including:
·       Core inflation trends in advanced economies
·       The global growth consensus for 2024
·       The links between growth and interest rate expectations
·       Growing concerns in the US about higher interest rates
·       Japan’s disappointing GDP growth in Q3
·       Equity market fund flows in developed and emerging economies

Oiling the wheels

During a week with minimal market-moving data and few central bank announcements, attention in the financial markets has turned towards the oil sector. This shift is primarily due to a significant drop in oil prices, which have reached three-month lows, with Brent crude trading at approximately $80 per barrel. In our charts this week we look at the following factors:
Record-low global supply chain pressures
The recent retreat in global commodity prices
Sticky euro area inflation expectations
Negative FDI flows in China
The weakness of the UK's trade flows with the EU
Weaker credit growth in the US

The Fed, forecasts and finance

Financial market sentiment has improved in recent days, partly thanks to the Fed’s decision this week to leave interest rates on hold. Although this decision was largely expected, recent data from the US as well as from Europe have additionally bolstered the belief that a global tightening cycle may be near its end. In our charts this week we home in on this and other themes. Specifically we examine:
·       The consensus for central bank policy rates
·       The tightening of US financial conditions
·       The BOJ’s monetary policy dilemma
·       Ebbing inflationary pressures in the euro area
·       Mutual fund flows in Asia
·       Credit card activity in Israel

Heating up

Financial markets have been more unsettled over the past few days partly because of an escalation of geopolitical tensions in the Middle East. But this has been exacerbated by a mixed set of company earnings reports from the United States coupled with lingering concerns about the trajectory of bond yields. In our charts this week we offer some insights on these issues with some perspective on:
·       US bond yields
·       Financial market stress
·       Credit conditions in the euro area
·       Unemployment rates in major economies
·       Asia’s portfolio flows
·       Global temperature anomalies

Gauging geopolitical risks

Geopolitical instability in the Middle East has continued to weigh on sentiment over the last few days not least given its potential to amplify financial instability. In our charts this week we look at this and other factors driving the global economic outlook. Specifically we home in on:
·         Geopolitical risk and financial stability
·         Energy prices and stagflation risks
·         China’s data surprises
·         Birth rates in China and Japan
·         The world economy’s growth potential
·         Fiscal policy space

Geopolitics, IMF forecasts and China

The flare up of geopolitical instability in Israel and Gaza has led investors to re-examine the outlook for the world economy over the past few days. But the release of the IMF’s latest World Economic Outlook publication also grabbed some of the financial headlines though whether its staff additionally need to now re-examine that outlook remains to be seen. In our charts this week we take a look at the following:
·         The IMF’s latest forecasts
·         The Blue Chip consensus for 2024
·         The longer-term US consensus for inflation
·         Oil prices and consumer confidence
·         Global current account imbalances
·         China’s capital flows

Unyielding

A further steep climb in US Treasury yields has been in the eye of the storm for financial markets over the past few days. In our charts this week we assess this trend and its driving factors. Specifically we home in on:
·         US yields and the dollar
·         Expectations for the Fed
·         Quantitative tightening policies and real yields
·         Inflation expectations and oil prices
·         Japan’s portfolio flows
·         Emerging market vulnerabilities
 

Trading places

Financial markets have been much more unsettled in recent weeks largely thanks to a “tighter for longer” narrative from the US Fed and a further steep climb in US Treasury yields. In this week’s charts of the week publication we focus on this and other issues including:
·         Slowing world trade growth
·         Ebbing consumer confidence
·         Broad money supply contractions in the euro area
·         US household balance sheets
·         US corporate balance sheets
·         Female labour force participation rates